Pre-Trade Checks: Fast Enough to Matter

Risk checks after send are like seatbelts after a crash. To matter, they must run before orders leave the building.

Millisecond pre-trade checks block fat-finger errors, limit breaches, and rogue algos without slowing execution.

Why it matters

Exchanges and regulators expect controls that prevent, not just log, bad orders. Pre-trade checks are the last line of defense before capital hits the market.

Common mistakes

• Placing checks in slow, centralized services.
• Relying on database reads for limits.
• Treating failures as warnings instead of blockers.

Implementation steps

Push checks to gateways

Embed limit logic where orders are routed.

Cache aggressively

Store risk limits in-memory for microsecond access.

Fail safe

If checks don’t respond in time, block the order.

LiquidityAI tie-in

• Pre-trade policy engine enforces limits inline.
• Distributed cache keeps checks fast and reliable.
• Telemetry proves to regulators that checks ran.

Case sketch (composite)

A bug multiplied order size by ten. LiquidityAI’s pre-trade gate rejected the orders instantly, avoiding a multi-million dollar error.

Takeaways

• Checks must run before, not after, the send.
• Speed and safety can coexist with proper architecture.
• Fail-safe defaults keep mistakes out of the market.

LiquidityAI provides tools and education for systematic trading. This article is for informational purposes only and does not constitute investment advice. Trading involves risk, including possible loss of principal.